On The One Year Anniversary Of The US Downgrade

A year ago, at the beginning of August 2011, the Obama Administration and the US Congress came to an “agreement” on financing the borrowing of their government for the foreseeable political future. That foreseeable future stretched out until November 6, 2012, the date of the election. The part of the deal which was trumpeted the loudest was a “plan” to cut deficit spending by $US 1.2 TRILLION - over the next TEN years. On July 27, the Obama Administration’s Office of Management and Budget (OMB)announced with great fanfare their latest “estimate” of the deficit for the fiscal year ending on September 30, 2012. It was $US 1.21 TRILLION, down 9 percent from the $US 1.33 TRILLION they had estimated in February. According to the White House, the major reason for this downward revision is the fact that the US Congress has blocked many of Mr Obama’s tax and spending plans. The February forecast assumed they would take place in the 2012 fiscal year. The new forecast assumes that they will take place in the 2013 fiscal year.

As of July 31, 2012 - with two months left to go in fiscal 2012 - US Treasury funded debt was already up by $US 1.14 TRILLION over the year to date. But there is something here that very few commentators have wasted any ink on. A year ago, the budget “deal” concocted between Mr Obama and his Congress was ballyhooing a “plan” to cut $US 1.2 TRILLION off annual budget deficits over a DECADE. Now, the projection for the 2012 budget is that the US government will add that amount to the funded debt of the US Treasury over ONE YEAR. This would be hilariously funny if it wasn’t so tragic. What is even funnier - and more tragic - is that the entire world is “depending” on the people who concoct this stuff.

Maybe I should have posted this here instead. 20 trillion here we come.

Stockton, California, Police Chief Tom Morris was supposed to bring stability to law enforcement when he was appointed to the job four years ago.

He lasted eight months and left the now-bankrupt city at age 52 with an annual pension that pays more than $204,000 -- the third of four chiefs who stayed in the position for less than three years and retired with an average of 92 percent of their final salaries.

“We didn’t have very many people looking out for the taxpayers when these deals were negotiated,” San Jose Mayor Chuck Reed, 63, said in a telephone interview.

and these are the guys we have fighting crime!! what a joke. Our government is simply legalized crime.

Anyway, the socialist trend is undeniable with the majority of US Citizens (and illegals too!) depending on local, state, regional and federal government funded fixes. This includes teachers, retirees, police, government contractors (eg. Defense, Energy, Environment, etc.), SSN folks and other government employees. They will sooner see America implode before giving up their tax-payer funded weekly fixes. Only collapse via inflation or deflation will be reverse the course of socialism in America.

Inflection point - when debt to GDP exceeds 100%, a country's financial flexibility becomes increasingly strained. For the first time since WWII, US debt exceeds 100%. From 2008 to 2010, debt rose a total of 23.6% while GDP rose a total of 1.6%. Unfortunately, with an annual federal budget deficit in the area of $1.4T, debt is likely to reach $16.7T as of the end of 2012 while assuming GDP grows 2.5%, total GDP is likely to reach $15.7T. Therefore, as of the end of 2012, debt to GDP is likely to be in the area of 106%. Assuming the federal deficit for 2013 remains at $1.4T and GDP growth is 2.5%, the total debt will rise to $18.1T and GDP will rise to $16.1T, resulting in debt to GDP of 112%. In comparison, France's and Italy's debt to GDP are 81% and 117% respectively. Regarding efforts to address budget problems, the Super Committee was seeking spending cuts of $1.5T over 10 years or merely $150B per year, and was a failure. Obviously, the current course is not enhancing credit quality.

Without some structural changes soon, restoring credit quality will become increasingly difficult. Yields on 10-year treasury notes have fallen to their lowest since early Feb 2010 with US Federal Reserve's aggressive purchases of US Treasuries. A concern is the rise in interest rates placing higher pressure on the US's credit quality. Excess growth of money supply (i.e., debt monetization) harms creditors and ultimately, the economy. Weak debt reduction efforts force a neg. watch.

Hilarious, all this talk about the "Fiscal Cliff" and the "Debt Bubble" and all the rest when the 10-yr. is at 1.5%.

And everybody is panicking because poor Spain has to pay a 7% coupon on new debt, when the U.S. 10-yr. yield was at 7% back in 2000 when the Nasdaq went to 5,000.

If the U.S. 10-yr. interest rates were to double and go back up to 3.0%, the markets would panic, the S & P 500 would crash back down to 1,100, and there would be an instantaneous bid into Treasuries driving yields back down to new record lows in no time.

Under that scenario, why not just print and spend to infinity as Paul Krugman suggests?

What is most depressing is that this continues to happen day after day after day, outright lies from every corner of gubmint and corporate america. Definitely not funny, when you really consider how much of our lives have been stolen from us! and how much more they still plan on taking! Our wealth, our time - our life, our kids lives! It really is getting close to the time where we stand up and eliminate the scurge of politicians, corporate officers and most definitely bankers - of all shapes and sizes.

It looks like either China or America will be forced to start and lead this revolution as Europe has proven to be unreliable and apparently incapable of mounting any type of real, sustained pushback. At least we had OWS for a time, an initial attempt. The next iteration will be far more aggressive than OWS as it that which will be required to change anything. Ruthless tactics that outright destroy the banks, corporations and Governments. In masses we can achieve this type of momentum and actually (and finally) realize that we are the ones with the power and puppets and pinheads like Obama (All politicians are pinheads regardless of party as far as I'm concerned) work for us.

The political pundits either don't get it or refuse to acknowledge this reality, both parties are equally corrupt and their actions over at least the last dozen years are unacceptable and reprehensible - in short, they are scum. It was the politicians that allowed this to happen and continue to allow it to happen on an even more grandiose scale. They don't even bother to read the legislation they submit, instead they simply collect the checks.To be a congressional member simply means you have the legal right to extort, cheat, lie and basically commit any type of fraud or crime you want without fear of retribution. Their fear lies exclusively in the corporate entities that fund their campaigns, they certainly haven't been watching out for us.

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